The magic wand of quieting the title to eliminate your mortgage on your Florida property has had a wild if not consistent ride – downhill. Whether being free of your mortgage is fact or fantasy, reality or hype, or just plain magic will soon be decided by the Florida Supreme Court.
In the early days of the concept of quieting title and eliminating the mortgage, most Florida state judges were not aware of the laws regarding the five year statute of limitations as applied to mortgage promissory notes, and uniquely the statute of repose that applies to mortgage liens. They also did not understand the concept of mortgage owners and mortgage servicers, nor that attorneys (many now disbarred) would actually try to default lenders knowingly by purposefully not serving the then correct lender or lender servicer with a summons and complaint to quiet title. (See QUIET TITLE SCHEME GONE WRONG MAKES ATTORNEY GO MISSING) As a result there were indeed a number of cases where the lender lost its lien of the mortgage and the ability to enforce its promissory note. This lead to an industry of investors buying properties at foreclosure of homeowner association liens with the expectation that they could “quiet title” as to the first mortgage, and thus get the property very inexpensively.
Under the current application of the law as the state's appellate courts have held, it is practically impossible to get a mortgage lien erased because of a 5 year statute of limitations. Issues regarding the promissory note have a different story that is more complicated. Needless to say, according to foreclosure defense attorneys, the courts have strained to adopt “creative” applications of long standing laws when it comes to enforcement of mortgages and their promissory notes, seemingly favoring the lenders.
A COLORFUL HISTORY TO QUIETING TITLE REGARDING MORTGAGES
I have written several times about quieting title in Florida and the line of articles has gone from amazing stories of wondrously obtaining title free and clear of the lender's mortgage, to today's reality. My articles can be found at:
I get so many calls based on these past articles that it was time to bring everyone up to date (I am putting updates pointing to this article, in each of the above articles). Quiet title exists in foreclosure cases but only in very limited circumstances. [Don’t confuse quiet title in a foreclosure case with quiet title of a tax deed – these are two different animals.]
THE CONCEPT OF QUIET TITLE OF A MORTGAGE - STATUTE OF REPOSE
There are several points that you need to know about quieting title of a mortgage. But the key ones are (1) the lien of the mortgage is governed by the "statute of repose"; (2) the ability to enforce a promissory note in court (the debt collection) is governed by the statute of limitations; and (3) there is a concept of acceleration of the promissory note and likewise a concept of deceleration. The first concept is that to quiet title to the property you need to eliminate the lien of the mortgage. Most people think if they eliminate the promissory note, the lien of the mortgage disappears. That is not true. The issue is that the mortgage acts as security for the debt of the promissory note but also as security for obligations contained in the mortgage itself. For example, the obligation to pay for the real estate taxes or homeowner association or keep the property insured by paying the insurance premiums are all in the mortgage and not in the promissory note. Every time you don’t make an escrow payment and every time the lender advances money to pay the real estate tax – each is a separate default under the mortgage. Let’s not forget this point as I will get back to it.
THE CONCEPT OF ELIMINATION OF THE PROMISSORY NOTE - ENFORCEABILITY
Next is the issue of the enforceability of the promissory note. The “statute of limitations” says that any action on a promissory note must be brought in a court of law within 5 years after the obligation’s maturity. Most mortgage promissory notes are 30 years long when they mature – that is the “due date” stated on the promissory note. But what happens when the promissory note is unpaid and the lender sends out a notice of default and acceleration? Doesn’t that mean the promissory note is due in full upon the event of acceleration? The courts have answered “yes” to this question, but they add a caveat: The courts also created the concept of “deceleration” or allowing the lender to back away from its declaration that the promissory note is now fully due (matured). The act of deceleration is somewhat in dispute in the appellate courts in Florida. Generally courts have decided that deceleration occurs when the lender voluntarily dismisses its foreclosure. There is more court disagreement on whether if the court dismisses the foreclosure with prejudice whether that too acts as a deceleration, or whether there is some affirmative act the lender must do (like send out a letter of deceleration) for the deceleration to occur.
Then there is the concept that the declared default of a promissory note or mortgage is a default based only on the payments then unpaid. This concept is based on the payment schedule of the promissory note usually being monthly. So if you get sued on the promissory note based on non-payment of the January 1, 2011 payment and the lender can’t prove the ownership of the promissory note or how much is due and loses its case in court, the courts say that the lender can sue you again based this next time on the February 1, 2011 non-payment. In other words, each event of payment is an opportunity for a separate and different event of default. This treatment of promissory notes seems unique to mortgage promissory notes.
Another important point is that the promissory note statute of limitations limits the time when a “court action” on to enforce the promissory note exists. However the statute is not a forgiveness statute. The promissory note still exists, can still be reported on your credit report and most important – is still supported by the mortgage. You may also still get collection letters and debt collector telephone calls. Just because the lender cannot collect the money in court does not mean that the indebtedness is no longer attached and secured by the mortgage.
ELIMINATION OF THE MORTGAGE LIEN
Now back to the mortgage lien. So now you have a promissory note that is unenforceable because of the statute of limitations and you have a mortgage that says that it matures on December 31, 2025. You want to sell your house and it is 2022. You have not heard from the mortgage lender for 7 years. Your title closing agent gives you the surprising news that your $200,000 mortgage that you have not paid for 14 years will require you pay the lender $800,000 in principal and accrued (and compounded) interest. Unfortunately, this is not a nightmare, it is real. Although the lender couldn’t sue you for the money due on the promissory note, they are still holding the house hostage through the lien of the mortgage and the promissory note it secures.
If you were selling the house and it is January 15, 2031, then the title company would check to be sure there is no filed action against you on the mortgage and if none, it would disregard the mortgage as the mortgage lien would have expired based on the “statute of repose” since it matured by its terms “plus 5 years”. Yes, you got rid of the mortgage just by waiting out the 35 years.
FACT VS. FICTION
The social problem remains that people are selective in what they believe by their desire to believe as opposed to actual reality. As a result there are endless homeowner borrowers that want to believe that they can get their home for free because the bank lost their paperwork or failed to sue them within 5 years or their case has been dismissed more than twice. And there are countless attorneys that will try to push the envelope of current legal application of the laws – which is in no means bad – but may give false hope to many borrowers who will also sink thousands of dollars into litigation that has a very high likelihood of failure.
A QUESTION OF GREAT PUBLIC IMPORTANCE
Many of the issues discussed above are before the Florida Supreme Court for resolution. The issues got there because the lower appellate court felt the issue was of “great public importance” or because two or more appellate courts disagreed with each other. A decision sometime in 2015 is expected and it will have wide reaching impact on the application of the statutes of limitation, quiet title of mortgage liens and probably thousands of mortgages and promissory notes in Florida.
© 2015 Richard P Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., AUTOMATED LAND TITLE COMPANY and ZARETSKY LAW GROUP, ATTORNEYS AT LAW, 1615 FORUM PLACE, SUITE 3A, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ@ZARETSKYLAW.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - Website www.Florida-Counsel.com.
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